DivGro is now DivGro 2.0!

DivGro moved to another platform and is now DivGro 2.0!

Please enjoy complimentary access to all the content on DivGro 2.0 until I formally launch it! You can sign up for free and join more than 1,125 existing members!

All content will be complimentary until the formal launch of DivGro 2.0. This includes my monthly newsletter and articles like
 How to Assess Dividend Quality and The Chowder Ruleand a live spreadsheet of my DivGro Portfolio.

Read more About DivGro 2.0 ...

Tuesday, January 31, 2023

Quarterly Review of DivGro: Q4-2022

Welcome to the 40th quarterly review of DivGro, my portfolio of dividend growth stocks. 

Quarterly reviews provide a summary of dividend income, dividend changes, and transactions executed in the past quarter. I also provide some charts showing various portfolio statistics. These reviews are mostly informational and help me to track progress over time.

My portfolio generated more than $11,580 of dividend income this quarter, and I'm projecting dividend income of at least $11,970 per quarter going forward.

In 2022, I collected dividend income of $47,646, or about 110% of my 2022 goal of $43,200. DivGro's all-time dividend income total is $206,369. 

Dividend Income

In Q4-2022, I collected dividend income totaling $11,589, down 2% from the dividends received in Q3-2022 but up 16% from the dividends received in Q4-2021.

83 different stocks and funds paid me quarterly dividends:
  • Apple Inc (AAPL) — income of $46.00
  • AbbVie Inc (ABBV) — income of $141.00
  • Accenture plc (ACN) — income of $11.20
  • Archer-Daniels-Midland Company (ADM) — income of $80.00
  • Automatic Data Processing, Inc (ADP) — income of $104.00
  • Aflac Incorporated (AFL) — income of $80.00
  • The Allstate Corporation (ALL) — income of $85.00
  • Amgen Inc (AMGN) — income of $223.10
  • American Tower Corporation (AMT) — income of $14.70
  • Air Products and Chemicals, Inc (APD) — income of $25.92
  • Atmos Energy Corporation (ATO) — income of $148.00
  • Broadcom Inc (AVGO) — income of $138.00
  • American States Water Company (AWR) — income of $79.50
  • BlackRock, Inc (BLK) — income of $170.80
  • Bristol-Myers Squibb Company (BMY) — income of $162.00
  • The Bank of Nova Scotia (BNS) — income of $114.02
  • Chubb Limited (CB) — income of $83.00
  • Comcast Corporation (CMCSA) — income of $121.50
  • Cummins Inc (CMI) — income of $157.00
  • Canadian National Railway Company (CNI) — income of $134.51
  • Costco Wholesale Corporation (COST) — income of $9.00
  • Cisco Systems, Inc (CSCO) — income of $114.00
  • Cintas Corporation (CTAS) — income of $11.50
  • CVS Health Corporation (CVS) — income of $55.00
  • Chevron Corporation (CVX) — income of $213.00
  • DTE Energy Company (DTE) — income of $88.50
  • Anthem, Inc (ELV) — income of $12.80
  • Enbridge Inc (ENB) — income of $191.55
  • FedEx Corporation (FDX) — income of $57.50
  • General Dynamics Corporation (GD) — income of $126.00
  • The Home Depot, Inc (HD) — income of $190.00
  • Honeywell International Inc (HON) — income of $103.00
  • Hormel Foods Corporation (HRL) — income of $78.00
  • International Business Machines Corporation (IBM) — income of $165.00
  • Intercontinental Exchange, Inc (ICE) — income of $38.00
  • Intel Corporation (INTC) — income of $102.20
  • Illinois Tool Works Inc (ITW) — income of $131.00
  • Johnson & Johnson (JNJ) — income of $85.88
  • JPMorgan Chase & Co (JPM) — income of $100.00
  • The Coca-Cola Company (KO) — income of $176.00
  • Lockheed Martin Corporation (LMT) — income of $120.00
  • Lowe's Companies, Inc (LOW) — income of $105.00
  • Mastercard Incorporated (MA) — income of $24.50
  • McDonald's Corporation (MCD) — income of $76.00
  • Mondelez International, Inc. (MDLZ) — income of $77.00
  • Medtronic plc (MDT) — income of $68.00
  • 3M Company (MMM) — income of $111.75
  • Altria Group, Inc (MO) — income of $216.20
  • Merck & Co., Inc (MRK) — income of $138.00
  • Microsoft Corporation (MSFT) — income of $68.00
  • NextEra Energy, Inc (NEE) — income of $42.50
  • AllianzGI Equity & Convertible Income Fund (NIE) — income of $1000.00
  • NIKE, Inc (NKE) — income of $9.68
  • National Retail Properties, Inc (NNN) — income of $110.00
  • Northrop Grumman Corporation (NOC) — income of $69.20
  • Oracle Corporation (ORCL) — income of $48.00
  • PACCAR Inc (PCAR) — income of $37.00
  • Public Service Enterprise Group Incorporated (PEG) — income of $162.00
  • Pfizer Inc (PFE) — income of $80.00
  • The Procter & Gamble Company (PG) — income of $91.33
  • Philip Morris International Inc (PM) — income of $152.40
  • Pinnacle West Capital Corporation (PNW) — income of $173.00
  • Public Storage (PSA) — income of $90.00
  • QUALCOMM Incorporated (QCOM) — income of $75.00
  • Raytheon Technologies Corporation (RTX) — income of $55.00
  • Royal Bank of Canada (RY) — income of $143.47
  • Starbucks Corporation (SBUX) — income of $106.00
  • Snap-on Incorporated (SNA) — income of $97.20
  • Sempra (SRE) — income of $91.60
  • Stryker Corporation (SYK) — income of $6.95
  • The Toronto-Dominion Bank (TD) — income of $130.37
  • The TJX Companies, Inc (TJX) — income of $29.50
  • T. Rowe Price Group, Inc (TROW) — income of $120.00
  • The Travelers Companies, Inc (TRV) — income of $93.00
  • Texas Instruments Incorporated (TXN) — income of $124.00
  • UnitedHealth Group Incorporated (UNH) — income of $66.00
  • Union Pacific Corporation (UNP) — income of $91.00
  • United Parcel Service, Inc (UPS) — income of $76.00
  • Visa Inc (V) — income of $45.00
  • Verizon Communications Inc (VZ) — income of $261.00
  • WEC Energy Group (WEC) — income of $50.93
  • W. P. Carey Inc (WPC) — income of $106.10
  • Xcel Energy Inc (XEL) — income of $80.44
Additionally, I collected monthly dividends from 7 different stocks and funds:
  • Virtus Artificial Intelligence & Technology Opportunities Fund (AIO) — income of $540.00
  • BlackRock Science and Technology Trust (BST) — income of $300.00
  • Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO) — income of $567.50
  • Eaton Vance Tax-Advantaged Dividend Income Fund (EVT) — income of $575.25
  • Main Street Capital (MAIN) — income of $210.40
  • BlackRock MuniHoldings California Quality Fund (MUC) — income of $187.00
  • Realty Income Corporation (O) — income of $124.00
      The following chart shows DivGro's dividend income by quarter:

      Dividend Changes

      Last quarter, I reported a projected annual dividend income (PADI) of $45,683. This quarter PADI increased to $45,885, easily topping my 2022 goal of increasing PADI to $45,000!

      DivGro's average YOC is 4.20%, down from the 4.31% reported at the end of Q3-2022. 

      Relative to the total capital invested, DivGro's projected annual yield is 6.92%, down from 7.17% at the end of Q3-2022. 

      The following table shows the stocks that announced dividend increases in Q4-2022 or have paid a higher dividend than before. I've included the new annual dividend and yield on cost [YOC]:

      Increase  Annual Div
       New YoC
      Automatic Data Processing, Inc
      Visa Inc
      Mastercard Incorporated
      Snap-on Incorporated
      Broadcom Inc
      NIKE, Inc
      McDonald's Corporation
      CVS Health Corporation
      Amgen Inc
      Atmos Energy Corporation
      PACCAR Inc
      Stryker Corporation
      DTE Energy Company
      Illinois Tool Works Inc
      WEC Energy Group
      Merck & Co., Inc
      Hormel Foods Corporation
      Bristol-Myers Squibb Company
      Aflac Incorporated
      AbbVie Inc
      Pfizer Inc
      Main Street Capital
      Pinnacle West Capital Corporation
      Canadian National Railway Company
      Realty Income Corporation
      W. P. Carey Inc
      I like seeing dividend increases of at least 7%. This quarter, fifteen of the 26 dividend increases topped 7%, while the arithmetic average of all the increases is 7.95%. That's a rate that outpaces the current inflation rate in the US of 6.5%.

      The following stocks paid a smaller US$ dividend in Q4-2022:
      • The Bank of Nova Scotia (BNS)decrease of 4.82%
      • Canadian National Railway Company (CNI)decrease of 5.71%
      • Enbridge Inc (ENB)decrease of 2.25%
      • Royal Bank of Canada (RY) — decrease of 2.97%
      • The Toronto-Dominion Bank (TD) — decrease of 5.91%
      Additionally, the following Closed-End Funds [CEFs] announced distribution cuts in Q4-2022:
      • Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO)decrease of 23.33%
      • Eaton Vance Tax-Advantaged Dividend Income Fund (EVT)decrease of 8.49%
      • BlackRock MuniHoldings California Quality Fund (MUC)decrease of 20.00%
      The CEFs in my portfolio all use leverage. With the Fed's benchmark rate at 4.5% and widely expected to increase even higher in 2023, CEFs will find it increasingly harder to pay their high distributions. So, additional distribution cuts are not out of the question. Nevertheless, I'm planning to hold my positions and even increase them occasionally. 

      Dividend Growth

      Some stocks announce dividend increases more than once per year, so when considering dividend growth, it is better to look at year-over-year increases:

      The arithmetic average year-over-year dividend growth rate of dividend-paying stocks in my portfolio is 11.9%, while my position-weighted average is 11.3%. 

      Below is a chart of the 5-year dividend growth rates:

      The arithmetic average of 5-year dividend growth rates of dividend-paying stocks in my portfolio is 9.9%, and the position-weighted average is 10.0%. Most DivGro's stocks have 5-year DGRs that exceed my target dividend growth rate of 7.00%! (These are colored green in the chart above.)


      This quarter I deployed new capital and options income as follows:

      New Positions

    • American States Water Company (AWR)new position of 200 shares
    • Illinois Tool Works Inc (ITW)new position of 85 shares
    • Alliant Energy Corporation (LNT)new position of 100 shares
      Closed Positions

    • Virtus Artificial Intelligence & Technology Opportunities Fund (AIO)closed position of 1,200 shares 
    • American Tower Corporation (AMT) —  closed position of 50 shares
    • American States Water Company (AWR) —  closed position of 200 shares 
    • BlackRock Science and Technology Trust (BST) —  closed position of 600 shares 
    • International Business Machines Corporation (IBM) —  closed position of 100 shares
    • Illinois Tool Works Inc (ITW) —  closed position of 100 shares 
    • 3M Company (MMM) —  closed position of 75 shares 
    • Tyson Foods, Inc (TSN) —  closed position of 200 shares 

    • Increased Positions

    • American Tower Corporation (AMT)added 40 shares and increased position to 50 shares
    • The Bank of Nova Scotia (BNS)added 150 shares and increased position to 300 shares
    • Comcast Corporation (CMCSA)added 50 shares and increased position to 500 shares
    • Digital Realty Trust, Inc (DLR)added 155 shares and increased position to 200 shares
    • Intel Corporation (INTC)added 220 shares and increased position to 500 shares
    • Main Street Capital (MAIN)added 40 shares and increased position to 300 shares
    • Medtronic plc (MDT)added 100 shares and increased position to 200 shares
    • Altria Group, Inc (MO)added 70 shares and increased position to 300 shares
    • BlackRock MuniHoldings California Quality Fund (MUC)added 1,500 shares and increased position to 3,000 shares
    • AllianzGI Equity & Convertible Income Fund (NIE)added 750 shares and increased position to 2,000 shares
    • Realty Income Corporation (O)added 50 shares and increased position to 200 shares
    • Oracle Corporation (ORCL)added 50 shares and increased position to 200 shares
    • Public Service Enterprise Group Incorporated (PEG)added 50 shares and increased position to 300 shares
    • PepsiCo, Inc (PEP)added 40 shares and increased position to 100 shares
    • Tyson Foods, Inc (TSN)added 100 shares and increased position to 200 shares
    • Union Pacific Corporation (UNP)added 22 shares and increased position to 70 shares
    • United Parcel Service, Inc (UPS)added 50 shares and increased position to 100 shares
    • Verizon Communications Inc (VZ)added 100 shares and increased position to 500 shares
    • WEC Energy Group (WEC)added 130 shares and increased position to 200 shares
    • Xcel Energy Inc (XEL)added 35 shares and increased position to 200 shares

    • Decreased Positions

    • Amgen Inc (AMGN)sold 15 shares and reduced position to 100 shares
        I covered these transactions in monthly reviews, so I won't rehash the details here. 

        To assess risk, I utilize Dividend Safety Scores provided by Simply Safe Dividends (SSD):

        From left to right, the colors represent Borderline SafeSafe, and Very Safe dividend safety scores. I no longer own Unsafe or Very Unsafe dividend growth stocks.

        DivGro now contains 89 different positions. Of these, 75 are dividend growth stocks, nine are dividend-paying stocks, and four are CEFs (closed-end funds). I also own one stock that does not pay dividends. 

        Here is the distribution of DivGro's stock holdings by sector:

        I also look at the distribution of my stocks by Super Sector:

        This quarter, the distribution of stocks in the Defensive Sectors increased from 33.3% to 33.9%. Likewise, stocks in the Cyclical Sectors increased from 26.1% to 27.0%. These increases happened at the cost of DivGro's exposure to the Sensitive Sectors, which decreased from 40.6% to 39.1%. My goal remains to slowly move towards an equal super sector distribution.

        Market Value

        At the end of Q4-2022, DivGro's market value represented a simple gain of 114% on the total amount invested. Of course, this does not consider the timing and size of cash deposits and withdrawals. DivGro's IRR (internal rate of return) since inception is 13.7%, which is a better measure of portfolio performance. 

        I'm happy to note that DivGro recovered nicely in Q4-2022 after a difficult Q3-2022!

        Portfolio Statistics

        In quarterly reviews, I like to present general portfolio statistics. 
        First, consider the weight of individual holdings in DivGro:

        NIE is the largest position in my portfolio, followed by MUC and HD. On the other hand, NKE, SYK, and ACN are the smallest positions in DivGro.
        Last year, I reworked my system for determining the target weights of positions in DivGro. 
        The system is dynamic and flexible and allows me to calibrate factors when my goals change. Here is a chart showing the current and target weights of dividend-paying stocks in DivGro:

        I'm not really interested in trimming positions to bring them back into "compliance," especially for positions in my taxable account. Rather, I'll favor buying more shares of underweight positions to fill any gaps from below.
        Next, let's look at the contribution of each position to DivGro's PADI, which depends not only on the stock's yield but also on the size of the investment.

        If a position has an outsized contribution to PADI, a dividend cut will have an outsized impact. While I invest in relatively safe dividend growth stocks, I want to limit the potential damage of unexpected dividend cuts. 
        NIE contributes 8.7% of DivGro's PADI — a rather large percentage coming from just one holding! In fact, my top four holdings contribute 21% to DivGro's dividend income! Since I only have a few years left before retirement, I hope to collect more income now to expand my portfolio of dividend-paying positions in the near future. 
        Here is a chart showing the distribution of dividend yields of stocks in my portfolio:

        The top-yielding positions in DivGro are NIE, MO, ETO, EVT, and MAIN, with yields that range from 10.97% (AIO) down to 7.31% (MAIN). Ordinarily, I don't like to see forward yields this high, but taking on more risk is necessary, given the current inflation rate of 6.5%.

        The arithmetic average yield of dividend-paying stocks in my portfolio is 3.05%, while the position-weighted average yield is 3.27%. Although both of these average yields are on the low side, I'm not too concerned because DivGro's average dividend growth rate is relatively high, and stocks often appreciate nicely with dividend increases.

        Yield on Cost (YoC) provides another perspective, effectively representing a stock's (initial) dividend yield and its dividend growth since my acquisition. I've owned MAIN the longest, so it is not surprising that its YoC is above 13%.

        Let's look at the payback percentage, or how much of my original investment I've received back as dividends. Generally, stocks I've owned for a long time will have larger paybacks, but dividend yield also plays a role: payback will grow faster for stocks with larger yields.

        MAIN is my oldest position, and with a payback of 84.4%, it has the largest payback in my portfolio! ABBV is the second highest with 43.0%.

        Here is a chart showing DivGro's year-over-year performance:

        But DivGro outperformed the S&P 500 in 2022, with negative returns of 5.6% versus negative returns of 19.4% for the S&P 500! 

        INTC and TROW have been the worst performers over the past year, with share prices dropping 49.3% and 44.5.%, respectively. In contrast, CVX and MRK have performed the best, with returns of 53.0% and 44.8%, respectively.

        One way to identify potentially undervalued positions is to compare the current forward yield to the 5-year average yield. Discounted stocks (relative to historical yields) are colored green:

        Presently, INTC and FDX appear to offer the best opportunities for additional investment. Based on how I determine target weights, however, my INTC position is overweight by 150 shares. As for FDX, I'd have to add 12 shares to match my target position.

        Concluding Remarks

        As mentioned in my December review article, I plan to make some changes to this blog and how I report on my DivGro portfolio. Thanks for all your support over the years. It's been a pleasure sharing my journey with you! 

        Soon, I'll post my tenth Annual Review article. 

        Thanks for reading!
        You can now follow me on Twitter and Facebook.

        No comments :

        Post a Comment

        Please don't include links in comments. I will mark such comments as spam and the comment won't be published. To make me aware of your blog or website, comment on my Blogrole page instead.

        Subscribe to Portfolio Insight and Save!

        Use my affiliate link to sign up for a free 14-day, no-obligation trial of Portfolio Insight. No credit card required. If you decide to subscribe during the trial period, you'll receive a 20% discount on the first year's annual subscription price of $330. Please note the 20% affiliate discount does not apply to the monthly rate.